Many investment property owners do not hold title to their properties as individuals.
Instead, they hold title through a business entity in which they have an ownership interest.
Why do property owners do this? The primary reasons are:
Privacy – Vesting as an entity provides a level of privacy. Because the property will be held in the name of the entity, the County Recorder’s office lists only the name of the entity, not the owner’s name as an individual.
Personal liability avoidance – If a properly formed Corporation or LLC is liable for a legal claim, only the assets of the entity can be reached to satisfy that claim. Except in limited circumstances, the personal assets of the individual shareholders or members are not at risk other than their investment in the entity. (Partnerships do not provide this personal property avoidance; in fact, holding title to property in the name of a partnership may even expand potential liability.)
It’s advisable for properties with multiple owners to have a written agreement between the owners specifying how they will make decisions relating to the property, under what circumstances one owner can require sale of the property, and how disputes between the multiple owners will be resolved.
Corporate bylaws provide this for corporate property owners.
An LLC’s operating agreement does the same for LLC property owners.
A partnership agreement provides a framework for partnership decisions.
No Entity? No Problem!
In most states, we can handle the paperwork for you!
